Like many others in this field, every year for the last 10 years, I have had to recluse myself from the last full week of the summer to attend VMWorld. Despite untold days of lost beach time, it has always been worth the expedition: each year, VMware would make its big new product introductions and directional statements right there, before our very eyes. Moreover, pretty much everyone – and I mean everyone – who is an influencer or a mover in enterprise IT is present at the show. The networking opportunities throughout the show and the web of after-hours parties are worth the price of admission.
This year was a little different. It wasn’t the chorus of folks pondering the death of on-prem virtualization - they’ve been making their dire predictions since at least 2010. (Recently, it has been with AWS, but before that it was Microsoft and Hyper-V or Linux with KVM). This year, it really felt like some pretty important people were freaking out. These are sort of folks that you would expect to be more level and calm. It probably isn’t obvious to the casual attendee that this is happening, and ostensibly not even to the folks in the trade press. Furthermore, much of this may have nothing to do with the future viability of VMware.
Let’s face it – the players who have had the biggest hand in taking the ecosystem to its heights are all having a really bad year. To figure out what is going on, it’s instructive to walk through each of their dystopian worlds.
If VMware is the father of the conference, EMC has to be the godfather. In case you haven’t noticed, EMC has been swallowed whole into the Dell machine. It’s bad enough that the merger is of unprecedented size. The complexity alone makes it challenging enough. However, after having been a part of the undoing of the previous Dell/EMC alliance, I can’t see how this isn’t emotionally unsettling to both sides. Add to that the feelings of betrayal from customers and partners of both companies, and you have a really volatile cocktail of instability. More specifically, here are just some of the hotspots:
- Employees: I live in Boston, and so it’s hard not to interact frequently with employees of EMC (and even Dell via EqualLogic). They are waiting for the axe to drop. In M&A-speak, “synergies” is another way of describing the situation where you don’t think you need all 160,000 employees. (News flash: It’s already begun. ) It’s hard not to empathize with these folks. If they seem subdued and unhappy, you certainly can’t blame them.
- Dell server OEM customers: It is not often noted that most all of the hyperconverged infrastructure (HCI) vendors get their server hardware from Dell. How does it feel when your hardware OEM just bought one of your competitors AND got a controlling stake in your key software OEM? Whoa. If you are at Nutanix or Simplivity, you must have the guys at Quanta on your speed dial by now.
- For VARs and resellers the refrain is similar: This new merged entity can pretty much dictate the profitability of their business. There are probably more than a few guys that have zero diversity in their product line cards after this deal. Worse yet, the alternatives are dwindling and startup activity this year was notably quiet. I’m an optimist about this group, however. I believe that this might be the compelling event that finally gets this market to move to managed services.
- Finally, there are the Dell storage customers: If you like your EqualLogic gear, I’m so sorry. I also hope you didn’t move to Compellent. It’s pretty clear that the product line reconciliation is going to have some winners and losers. Moreover, I doubt the team in Hopkinton, Massachusetts is going to make any dumb decisions that would upset their already nonplussed enterprise customer base. This means that if you made an election to move away from EMC to a Dell offering, you might feel a little silly right now.
How freaked out is everyone? Let me add this piece of personal color: in my five years as a Dell executive, I had the privilege of interacting with Michael quite frequently. When he did visit, he was always hard pressed to stay away from home for more than a night, preferring to spend as much time as possible in Austin. This last week, he was in Las Vegas during the entire weekend, meeting with customers and partners. He was still there on Tuesday, as I ran into him at a several VMware parties. I like Vegas as much as the next guy, but more than a couple of nights strains the limits of human endurance. Unless he acquired a newfound love of gambling, Michael clearly had been spending a lot of time trying to calm people down.
Startups and VCs
“Have you gotten any party invites this year?” was the question that I got most frequently the week prior to the conference. Sadly, the answer was “Not this year.” For every year, as long as I can remember, the venture capital (VC) community would throw some of the more lavish parties of the conference. Usually limited to the entrepreneurial community and perhaps the corporate development and analyst communities that made their valuations whole, these parties were often the place where an entrepreneur got to network with people that could make a difference. More than one fledgling enterprise has sprouted out of discussions during cocktails over the years.
This year was remarkably low key. Although there were some events, they were not well publicized, and many firms chose not to do anything at all. It was obvious that venture investors had vacated the conference from a PR standpoint. This is probably an understandable move given the vicissitudes of the previous months. With a few broken IPOs (e.g. PSTG) and a bunch of stranded unicorns in the infrastructure space, the level of angst has to have gone up a few notches. Indeed, it will probably be a while before markets and the natural acquirers in enterprise tech emerge from their doldrums.
A quick walk through the Solutions Exchange (the show floor at VMWorld) did nothing to dispel the notion that activity had died down significantly. The number of new names on the booths seemed very small, and not always relevant to VMware. Interestingly, many of last years’ new companies were notably absent. As one new startup founder explained, “The only reason we are here is because we are announcing our first product.” If innovation dollars are being put to work, they are certainly not being applied here this year. If nothing else, this fact alone should add to the angst in Palo Alto.
There was a point during the Monday morning keynote where I thought I was surely hallucinating. I was watching a demo of a VMware orchestration UI and it was pretty clear that there was an AWS logo on it. Not just that, there were a few other public cloud logos there as well. As recently as last year, the VMware idea of hybrid cloud meant vCloud Air migration. Here we were, a year later, and VMware seemed to be trying to embrace a hybrid vision that included resources from the big three public clouds. This was big. This was sudden.
The cross-cloud architecture is clearly a statement that VMware will not allow itself to become irrelevant as their enterprise customer base pivots towards the on-demand business model of the public clouds. Anyone in the business of moving VMware workloads into EC2 and back probably had a bad morning last Monday. That said, our friends at VMware have probably had a really bad year thinking about public cloud. This was the inevitable correct choice: try and embrace the next wave.
So where is this all going? In reality, the public cloud has sliced off only a very small sliver of a trillion-dollar market. I know many of the VMware folks well, and I have a lot of confidence that they will not simply disappear into the ether. The awkward embrace of Amazon in the keynote demo is an indication that they are listening, and that they will find ways to matter in the transition to on-demand IT. There’s a lot of work to be done and a lot of money still to be made.
As for the general direction, I think we can safely say that when the enterprise moves to the cloud, it will be a hybrid approach: multiple clouds, both private and public. No one is going to tie their destiny to a single provider of any technology. This means that – much to our delight here at ClearSky Data - a network based data management approach that enables mobility and agility has immense value, and hence will become a key ingredient of cloud adoption in the enterprise.